Today’s post is a guest submission from reader Brian Weeks. Thanks for sharing and for your insights Brian. If you are interested in submitting a guest post just drop me a line via the contact button at the top of the page.
Use wisely your power of choice.
Og Mandino wrote those six simple words in one of the greatest books ever written – The Greatest Miracle in the World. If there were only one key to success, that principle just might be it. Our power of choice is one of the greatest we have. Every single day we’re faced with a plethora of choices, many of which involve a simple money choice. Should we spend it or should we save it? If we use wisely our power of choice regarding whether or not to spend or save our funds, we can gain control over our financial future. The act of saving is extraordinarily powerful – much moreso than many of us may realize.
Why is saving money so powerful?
Well, for one, it increases your bottom line. Every dollar you save is an instant boost to your bottom line that you control!
Taxation makes saving money even more beneficial. Ben Franklin said “A penny saved is a penny earned.” That was true in his day . . . before we had income taxes in America. But, today, I say that a penny saved is better than a penny earned. Here’s why. Let’s say your combined state and federal marginal income tax rate is 30%. If you save an extra $100 per month, your bottom line increases by $100. However, if you earn an extra $100 per month, your bottom line only increases by $70. This is certainly an oversimplified example, but the idea shows just how much more powerful saving money is than we give it credit for!
Those are two good reasons why saving money is so powerful today. But, what about in the future? Can saving money be even more powerful if we use time to our advantage? Absolutely!
Let’s say you take some of the newfound ideas on saving money you’ve learned from Save Outside the Box and you’re able to put aside an additional $100 a month. Not only is that $100 real (and not diminished by taxes like we talked about earlier), but if you invest it month after month in a well-diversified mix of index funds and/or ETFs in your Roth IRA with a modest return of 7% per year, that $100 will grow to staggering amounts through the years. Let’s take a look into the future.
What if you invest $100 a month for 10 years? You’ll have $16,776.45.
20 years? $49,581.56.
30 years? $114,114.17!
40 years? $241,059.58!!
50 years? $490,780.42!!!
All from just saving a little extra money every month? Yep. Now you’re starting to see why I get so excited about saving money! You wanna save and invest more than that? Rock and roll. Plug the numbers in and see just how quickly your savings can add up. It can get pretty ridiculous pretty quickly. All thanks to the power of saving money. And it all started with your decision to eat at home that night, your decision to buy that cheaper car, your decision to buy generic instead of brand name groceries. It all started with your power of choice. Little tiny changes you make today can pay off BIG down the road. Every time I’m faced with a choice of whether to spend my money or to save it I think, How much could this be one day if I save and invest this money instead? Every. Single. Time. Always remember, the less money you spend the more money you have.
All that money from saving is cool and all, but here’s where the real power of saving comes into play: the things your money can now actually do for you and for others. Saving money gives you more control. It gives you more options. It gives you more power to do the things you want to do. You can give more away. You can stress less. You can worry less about money. You can be ready to strike when a deal comes your way, whether it’s a killer deal on LED light bulbs or a an investment property that will make you more over the long haul. You can invest more for an even bigger bundle of savings down the road. You can become financially free and retire early so you can then do whatever you want, whenever you want, for however long you want. Saving money can give you the all important power of choice.
So, the next time you’re faced with a saving vs. spending decision, no matter how small or large – all the way from whether or not to buy that bottled water (never!) to how much to spend on a car or house, think of the power of saving money and remember . . . Use wisely your power of choice.
How about you? How have you seen the power of saving money work in your life? What have you been able to accomplish that you wouldn’t have been able to had it not been for saving money well?
[photos courtesy of 401k and Nate]
11 Comment responses
No doubt. Time and compound interest can be tremendous friends.
We saved like crazy and were able to pay off my $40,000 in student loans. Feels great!
Nice! That’s a lot of debt out of your life. Congratulations.
Now that’s the power of saving! Thanks for sharing Michelle.
Nice. Getting from under the burden of student loans is a great feeling!
Years ago I was horrible with saving and spent all my money. Then, after paying for my car (4 years), and seeing how HARD it was, I realized there’s something I need to change. I am currently budgeting and keeping track of my expenses and also saving. It helped us A LOT. We have a small business which has good and bad days (savings kept us off debt, during the low months), we’re expecting a child etc. Having some money saved really helps a family and it’s something we’ll keep on doing for the rest of our lives.
Sounds like you have learned the lesson of how powerful a dollar can be Dojo. Congrats on expecting a child! We just had a daughter 8 weeks ago and it’s one of the coolest things ever! I wrote a post on saving on baby stuff that you should check out. http://www.saveoutsidethebox.com/ways-to-save-money-on-baby-stuff/
I plan to go more in depth on the cloth diapering thing soon. So far so good. I totally recommend it. Over the long run it’ll save us a ton and the horror stories are incredibly overblown.
Great point that saving money helps keep your business healthy and your stress lower. As a fellow entrepreneur, I completely agree. Having savings can have a huge positive effect on both of those things.
Very well written and interesting article. It really will make me stop to think the next time I want to spend on something i shouldn’t instead of save. Thanks for the motivation on moving towards financial freedom!
Glad to hear it helped you Laura.